U.S. Fed Meeting: FOMC Holds Rates at 4.25%–4.50%, Signals 50 bps Cut in 2025

The Federal Reserve has hit the pause button once again. At its latest meeting, the Fed's rate-setting committee, the FOMC, kept interest rates unchanged in the 4.25%–4.50% range. That's the sixth straight meeting with no change under Chair Jerome Powell. But here's the twist: the Fed now sees a possibility of two minor rate cuts in 2025, totalling 0.50%. It's a slight but notable shift as the economy navigates its way through uncertainty.

Why No Change?

The decision to hold steady was unanimous. Inflation's still stubborn, and global uncertainty hasn't helped. The Fed's latest projections, often called the "dot plot," point to two quarter-point cuts next year. But it's not a done deal.

The Fed isn't exactly united on this. More members now oppose any cuts at all, 7 out of 19, up from 4 back in March. A few support just one cut. That shows a slightly more cautious (or "hawkish") mood inside the Fed.

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Inflation Still a Thorn

Chair Powell made it clear: the Fed needs to see more data before making a move. He even said it could take "a couple of months, or however long it takes" to be confident inflation is cooling off, especially as tariffs could push prices up for consumers.

Their updated forecasts indicate that inflation will remain above target. Core PCE (the Fed's preferred inflation gauge) is expected to reach 3.1% in 2025, still above the 2% target. Meanwhile, the economy is expected to slow, with GDP growth potentially dropping to just 1.4% this year, and unemployment is expected to rise to around 4.5%.

Politics, Pressure & Global Tensions

The Fed's decision also comes amid political noise. President Trump has been vocal, calling Powell "stupid" and demanding deep rate cuts, plus hinting he might replace him. Powell didn't flinch, reminding everyone data, not politics, guide the Fed.

And it's not just a matter of political drama. Global tensions, from the Israel-Iran conflict to ongoing trade disputes, are adding more pressure. While Powell downplayed the inflationary impact of higher oil prices, he admitted that the Fed is watching those risks closely.

How the Markets Took It

Markets were initially upbeat; after all, the Fed sees rate cuts on the horizon. But Powell's cautious tone cooled things off. Stocks dipped, and Treasury yields climbed. As for the next move? Traders now see a 70% chance the Fed will cut rates in September, pushing back earlier expectations of a summer cut.

Looking Ahead: A Cautious Path

Powell's main message? Be patient. The Fed won't rush into cuts based solely on forecasts. He even reminded people that the dot plot is just a prediction, and things are still pretty "foggy."

For now, the Fed's sticking with its plan to reduce the size of its balance sheet, part of its broader strategy to keep inflation in check.

What to Watch in 2025

• Rate cuts on the table: The Fed's central forecast suggests two cuts next year, but many members are leaning toward fewer.
• Inflation isn't done yet: Core inflation is expected to remain above the Fed's 2% target well into 2027.
• Growth slows down: The economy is expected to grow by just 1.4% in 2025, while unemployment is expected to tick up.

Bottom Line

The Fed's not slamming the brakes, but it's not hitting the gas, either. Any rate cuts will depend on how inflation, growth, and the job market shape up. Powell made it clear: the Fed is staying independent, cautious, and keeping all options open.